Intel says quarterly profits fell 25 percent as PC industry reels

Remember how we told you last week that PC makers are hurting? Not surprisingly, Intel, the world’s largest chip manufacturer, has been hurting too.

On Tuesday the company released its latest earnings report, revealing that its quarterly profits from the first quarter of 2013 ($2.045 billion), are down 25 percent when compared to the same period last year ($2.738 billion).

"Amidst market softness, Intel performed well in the first quarter and I'm excited about what lies ahead for the company," Paul Otellini, the company’s CEO, said in a statement Tuesday. "We shipped our next-generation PC microprocessors, introduced a new family of products for micro-servers, and will ship our new tablet and smartphone microprocessors this quarter."

The announcement comes one day after Morgan Stanley semiconductor industry analysts argued that “ARM-led commoditization” would likely hit the industry in the near future.

"Intel is in a battle of survival—not only do they need to penetrate massively into the computing spaces currently dominated by the ARM camp, but they also need to keep the ARM camp from burrowing their way upward into the PC space," wrote Stacy Rasgon, a Bernstein Research analyst, in a recent investors’ note. "This will only get harder (and more confusing) as the lines between PCs and tablets further blur."

In its Tuesday press release, Intel said it is reducing its annual 2013 capital spending from $13 billion to $12 billion, plus or minus $500 million, but it held to its forecast of a “single-digit percentage increase” for its 2013 revenue forecast.

"That scares the hell out of me. They are holding to the same ultra-bullish forecast they gave before," Rasgon told Reuters. "They are presumably pretty bullish on the new products they are planning."